In the twilight years of the Apartheid regime, the Treasury executed a crafty financial maneuver that not only bought the government more time but also enriched those in power before their inevitable downfall. This historical precedent is worth reflecting on as South Africa awaits the delayed national budget, set to be presented in Parliament on 12 March.
During the 1980s, the government introduced a General Sales Tax (GST), which functioned similarly to today’s Value Added Tax (VAT). This indirect tax was applied to a wide range of goods and services, impacting consumers across the board.
Despite its regressive nature, the GST saw a dramatic surge in the final years of Apartheid. In 1984, the rate stood at 7%, but by 1989, it had climbed to 13%—an extraordinary increase over just five years. The government justified this steep rise by pointing to international market pressures, trade sanctions, and national security needs. In reality, however, it simply meant squeezing more revenue from the public.
The impact on state revenue was immense. GST collections more than doubled in a decade, growing from 14% of total tax revenue in 1980 to 29% in 1990. As history has shown, much of this funding was channelled into corrupt activities aimed at propping up the Apartheid system and lining the pockets of its leaders.
Professor Jonathan Hyslop of the Wits Institute for Social and Economic Research noted that between 1984 and 1994, as the collapse of white minority rule became inevitable, there was a frenzied rush among officials to seize as much as possible before the regime fell.
Fast forward to 2025, and there are unsettling echoes of this past.
Finance Minister Enoch Godongwana recently warned that state finances are in dire straits. As Parliament was set to begin its budget deliberations on 19 February, the minister effectively admitted that government funds are running dangerously low.
One proposed—but ultimately rejected—solution was to raise VAT by 2 percentage points, from 15% to 17%, a move that could have generated an estimated R50 billion in additional revenue. However, increasing VAT is a flawed approach.
While wealthier individuals may contribute more in absolute terms, they pay a smaller proportion of their income compared to lower-income groups. The poor, who are already struggling, would bear the heaviest burden.
South Africans are already stretched to their limits. The cost of living continues to soar, with everyday essentials such as food, transport, electricity, school fees, and rent becoming increasingly unaffordable. The country needs solutions that provide relief rather than add to the strain.
Since a VAT hike now appears politically untenable, the Minister of Finance has several other avenues to explore.
First and foremost, economic growth must be prioritized, targeting a sustainable expansion of 5% per year. Relying on borrowing or taxation as short-term fixes does not address the core issues: a stagnant economy, a shrinking tax base, and record-high unemployment.
A leaner, more efficient government structure would free up billions in wasted expenditure:
Reduce the size of Cabinet. A streamlined executive would enhance coordination and effectiveness while saving taxpayer money. BOSA proposes merging the Small Business Development and Trade and Industry departments to cut redundancy, saving R2.4 billion. Similarly, the Department of Planning, Monitoring, and Evaluation could be dissolved, integrating its functions elsewhere, yielding a further R1 billion in savings.
Abolish Deputy Minister positions. These roles add costs without delivering significant value. Eliminating them would save R500 million annually.
End excessive VIP protection for politicians. Elected officials are meant to serve the public, not enjoy privileges at their expense. Scrapping VIP security details could redirect R2 billion towards real public safety initiatives.
Shut down failing State-Owned Enterprises (SOEs). These entities have drained the economy, costing the country an estimated R2 trillion in lost output since 2010, while absorbing R400 billion in bailouts. Non-essential and consistently underperforming SOEs should be phased out to relieve taxpayers.
Remove ineffective corporate tax subsidies. The Employment Tax Incentive (ETI) has failed to create meaningful employment. Many companies exploit the system without producing real job opportunities. Ending this wasteful scheme would save R6.6 billion.
Consolidate government marketing agencies. Brand SA, SA Tourism, Trade Investment SA, Export Marketing, and DIRCO’s foreign marketing functions all operate separately, creating inefficiencies. Merging them into a single streamlined entity could save R5 billion.
Reform the Road Accident Fund (RAF). Rampant financial mismanagement and fraudulent claims plague the RAF. Introducing stricter eligibility criteria—such as capping payouts for high-income claimants—would curb wasteful spending and potentially save R20 billion.
South Africans cannot afford more financial strain. The Minister of Finance has both the authority and the tools to implement these cost-cutting measures and redirect funds where they are truly needed.
Mmusi Maimane MP is the leader of BOSA and chairs Parliament’s Standing Committee on Appropriations.
The Star